The recently approved $1.2 trillion federal infrastructure financing package provides the real estate industry with a once-in-a-generation base to build on for projects and communities, according to ULI experts.
“This really will guide where development will be happening over the next 15 to 30 years,” including what types of projects will be built and where, says Paul Angelone, senior director of the Institute’s Curtis Infrastructure Initiative. “The next couple years will really set that longer-term spending.”
And while the money comes via the federal government, much of the spending decisions will be made at the state and local levels, according to panelists at “Leveraging Federal Infrastructure Investment for Housing and Transportation Opportunities,” a webinar sponsored by the Curtis Initiative just two days after U.S. President Joseph R. Biden signed the package into law.
Panelists provided an overview of U.S. infrastructure spending and the details of the infrastructure package. Then they discussed projects in Austin, Texas, and Washington, D.C., that demonstrate how infrastructure investment supports equitable and desirable development.
Some highlights from the legislation, the webinar, and other recent ULI work on infrastructure include the following:
- The infrastructure package funds both existing and new programs. The new money in the Infrastructure Investment and Jobs Act comes to about $550 billion over five years. The largest pile of money is for maintaining or building roads and bridges. Much of that is reauthorization of existing programs, but there is also $110 billion in new such funding. Other new money goes to railroads, public transit, electrification, clean water, and more.
- ULI members define infrastructure as much more than roads and bridges. A spring 2021 Curtis Initiative survey of members found respondents “see increasing affordable housing, adapting to and mitigating climate change, increasing renewable and green energy, maintaining existing infrastructure, and improving public transportation as the top priorities.”
- Federal funding is just the start. “In the U.S., different from many other countries, the public infrastructure base is largely owned by states and localities,” said Mike Parker, EY Americas Infrastructure Leader, who moderated the webinar. The same goes for funding. In the past, the federal government typically accounted for a third or less of infrastructure spending. “A really important intuition when this new spending happens is the extent to which that new spending leverages and attracts, rather than displaces, state and local government capital as well as private investment,” Parker said.
- In Austin, infrastructure expansion aims to support equitable growth. Fast-growing Austin is one of the largest U.S. cities that has not invested significantly in a public transit structure, said webinar panelist Sam Sargent, director of strategy at the Austin Transit Partnership. However, Austin voters in 2020 approved a property tax increase that will help pay for Project Connect, a 10-year, $7.1 billion transit plan. Funding will also come from the federal government and from the regional transit agency. Sargent said that Austin “hit a tipping point in terms of congestion and affordability and concerns over sustainability.” Project Connect will build a system of commuter services including light rail, a transit tunnel, and enhanced bus rapid transit. But the project also includes $300 million to prevent displacement of current residents, and was designed with an eye to locking in affordability even as it supports development along transit corridors. “We’ve got an enormous opportunity here to not only create jobs through the actual construction of Project Connect,” Sargent said, “but creation of new development opportunities, new small businesses, new places for people to live up and down these lines, and the $300 million is going to be a large part of that. But I think that the private sector and our city partners, as well as the federal government, are going to create a lot of new ways to create value and create new homes and new places for small businesses to thrive around our transit system.”
- In Washington, D.C., development demonstrates infrastructure payback. Vicki Davis, managing partner of developer Urban Atlantic, laid out three of her company’s infrastructure-dependent projects, including the redevelopment of an aging 700-unit public housing project in Washington’s Capitol Riverfront neighborhood into 21 acres of what will be 1.7 million square feet of mixed-use development, with 1,600 units of mixed-income townhouses, apartments, and condos (with one-for-one replacement of the subsidized units). The surrounding neighborhood, also known as Navy Yard, has been the city’s fastest-growing over the last decade. The city invested about $1.1 billion in infrastructure in the 500-acre neighborhood, including parks, water system improvements, public housing, and a Major League Baseball stadium, according to the local business improvement district. Other “catalytic” investments, Davis said, were a headquarters for the federal Department of Transportation and a subway station. She pointed out that the infrastructure investment so far has spawned 25 million square feet (2.32 million sq m) of development, with thousands of new residents, large office buildings, hotels, and retail. “And the tax income to the city compared to the very small upfront—but sizable—investment in infrastructure is paid back multiple, multiple fold in terms of quality of life, income taxes, real estate taxes, sales taxes, and growth of the city. So very interesting, the value proposition of the small upfront catalytic investment in infrastructure, always hardest to do for developers because there’s no direct return on it—to what we have now.”
- Drill down into the details to see where the money will go. Look closely at how the bill will affect given subject areas, Parker recommended, because money may be across different buckets. For instance, he said, if you are interested in electric vehicles and carbon reduction, “look within the federal highway program and see there’s a carbon reduction program, by formula. There’s also a $2.5 billion [electric vehicle] charging and refueling program within that. That’s distinct from the … $5 billion for electric school buses and electric ferries grants,” and other money for electric transmission or zero-emission fleets. He said, “Much of these funds can be flexible, or can be used to really achieve a larger purpose, but at the same time, [we need] to realize that if we don’t mobilize the state and local and private-sector funding and investment focus as well, we’ll lose the magnitude and the distinct opportunity that’s arising from this generational level of investment.”
- Localities and states are key. Much of the federal infrastructure money will be distributed to states by formula. That state-level role shapes spending. For instance, money targeted for highways can prioritize single-occupancy cars, or “could advance environmental, resilience, and equity goals if it took a ‘fix-it-first’ approach, prioritized traffic calming, dedicated lanes to transit, or enhanced gridded networks,” according to a recent ULI report. That report from the Shaw Symposium on Urban Community Issues was sponsored by the Curtis Initiative, in partnership with ULI’s Terwilliger Center for Housing, and highlighted key themes for equitable investment in infrastructure and housing. Webinar panelists recommended that industry members look to regional planning organizations and state transit authorities for input into and information about specific opportunities provided by the new infrastructure package.
